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AMD-AMMIT! Hundreds face axe at chip maker as PC, graphics crash

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Following a grim earnings report on Thursday, AMD has announced a restructuring plan that includes axing seven per cent of its workforce by the end of the year.

The plan will see AMD issuing layoff notices to about 710 employees worldwide, and is expected to cost the chipmaker $57m in severance payments.

"While decisions that impact the size of our global team are never entered into lightly, this is the right step to ensure we prioritize our resources and engineering investments in our highest-priority opportunities that can drive improved profitability and long-term growth," new CEO Lisa Su said in a statement.

The plan comes after AMD reported earnings and revenues that missed analysts' estimates for the third quarter of its fiscal 2014 and warned that it expected sales to shrink even further in the fourth quarter.

Revenues for the three months ending on September 27 were split pretty evenly between the firm's two main business units – and that wasn't good. Revenues from the Computing and Graphics division were just $781m, a 16 per cent year-on-year decline.

Revenues for the Enterprise, Embedded, and Semi-Custom division – which makes server and embedded processors and semi-custom system-on-chips (SoCs) – were up 21 per cent from a year ago, to $648m. But that was barely enough to keep the company on track. Its total revenues were $1.43bn, down 2 per cent from the same period a year ago and flat from the previous sequential quarter.

AMD's net income also tanked to $20m, which was better than the previous quarter but a 35 per cent drop from the year-ago period. Similarly, its earnings were a disappointing $0.02 per diluted share.

The chipmaker reported operating income of $63m, but this figure disguises the fact that literally all of it came from the enterprise side of the business. The server and embedded division reported an operating profit of $108m, but Computing and Graphics – which includes processors and chipsets for PCs and all of AMD's GPUs – actually lost $17m in the quarter.

Don't expect things to look better any time soon, either. AMD said it expected its revenues to slide another 10 to 16 per cent in the next quarter, sequentially.

Hence, layoffs. AMD plans to complete its job cuts by the end of the fourth quarter of 2014. It will then also sell off some of its real estate, for which it expects to incur a restructuring charge of around $13m in the first half of 2015.

Once the dust clears, the company expects to save $9m in operating expenses in Q4 of 2014 and another $85m in 2015. How it plans to sell more chips, however, was not immediately clear, and the news sent its shares sinking 4.5 per cent after the closing bell. ®